How to calculate the profit of a digital asset. This article will discuss this matter which is often called Absolute Return
Understanding Absolute Return
Absolute return is a measurement of the performance of an investment over a certain period. It measures the change in the total value of an asset, whether it increases or decreases, expressed as a percentage.
This metric assesses the overall gain or loss arising from an investment, and can appear as positive or negative.
Calculating Absolute Return
Calculating absolute return involves two important variables: the current value of the asset or portfolio and its initial value.
The way to calculate absolute return is as follows:
Annual Absolute Return
In contrast to absolute return, annual absolute return indicates the annual return that an investor can expect from his investment. The annual absolute rate of return can be calculated through the accumulated annual growth rate.
The accumulated returns over time known as the accumulated annual growth rate (CAGR), provide potential investors with insight into the results of an investment without informing them of the level of uncertainty of the investment.
Although calculating absolute return is simple, translating this number into terms that apply to other types of investments is challenging. A more comprehensive perspective can be gained by comparing different types of mutual funds traded over various time periods, especially when continuously investing the profits generated.
Determining the most profitable investment becomes too difficult due to differences in time span and rate of return. The solution is to use annual absolute return which presents returns through a one year equivalent expression.
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DISCLAIMER: This article is informational in nature and does not constitute an offer or solicitation to
sell and buy any crypto asset. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.
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